Published in Personal Injury on September 14, 2017
One of the most frequent questions clients ask is whether the defendant in their lawsuit (or the insurance company who is paying the claim) can be forced to pay the clients’ attorney fees. In almost all cases, the answer to that question is “no.”
Most states follow the “American Rule,” which requires parties to pay their own fees if they choose to bring a lawsuit. The only exceptions to that rule are (1) where the legislature has passed a law that allows a winning party to recover its attorney fees (like in many employment discrimination cases and consumer protection cases) and (2) where the parties have an agreement that provides that the winning party can recover its attorney fees from the loser.
There have been many attempts to change the general rule to a “loser pays” system, but for now, the American Rule is still the majority rule. Even where the other party has acted particularly bad and is required to pay punitive damages, each party will be required to pay its own fees. The most commonly cited reason for following this rule is to avoid discouraging parties from seeking legal remedies in court. Where someone is wronged by another party, we do not want to prevent them from bringing a legal action simply because of a fear that they will have to pay the other party’s legal fees. This is particularly true where there is a substantial financial disparity between the parties.
For example, consider a person who is hit by a UPS truck because the driver was operating the vehicle negligently. UPS is an enormous company with immense resources to fight any lawsuit. UPS could spend tens (or even hundreds) of thousands of dollars in its legal defense. Any individual hit by the truck will almost certainly be unable to spend that amount of money on his or her claim. If the American judicial system adopted a “loser-pays” approach, the injured party could be forced to pay all of UPS’s legal fees if a jury found for UPS. With this risk, the injured party may never bring legal action against UPS, which would, in turn, lessen UPS’s motivation to ensure that its drivers do not operate trucks negligently.
The most common argument in favor of a “loser pays” rule is that it would discourage frivolous suits. However, statistics show that the percentage of cases that can be fairly described as “frivolous” is far smaller than represented to the public. According to one site (here), the Rand Institute for Civil Justice found that since 1991, only 10 percent of injured people seek compensation and only 2 percent file lawsuits. Additionally, injury suits only make up about 6% of all cases that are filed. If you are concerned that the cost of a lawyer is too high, consider this from an earlier blog post.
While the American Rule may not be perfect, it generally protects individuals and ensures their continued access to the courts.